Former KPMG senior partner to plead guilty to securities fraud

Stuart Pfeifer, Los Angeles Times

A former senior partner at accounting firm KPMG's Los Angeles office has agreed to plead guilty to a securities fraud charge of passing inside information about the firm's clients to a friend, who used it to make more than $1 million in stock trades.

Scott London, 50, who supervised more than 500 KPMG auditors, agreed Tuesday to plead guilty to one felony charge, according to a court document he signed. The date he will enter the guilty plea has not yet been scheduled.

Both men have acknowledged that London gave Shaw sneak previews of company earnings reports and told him about acquisitions involving KPMG clients before they were made public, and Shaw used the information to make trades.

The insider trading charge carries a potential sentence of 20 years in federal prison, but London probably would receive significantly less time because he has no prior criminal record.

Shaw has admitted giving London tens of thousands of dollars in cash in exchange for the inside information about KPMG's clients.

According to court documents, Shaw also said that he typically arranged to meet London on a side street near Shaw's business so that he could give London bags containing $100 bills wrapped in $10,000 bundles.

Shaw also said he gave London a $12,000 Rolex Cosmograph Daytona watch, as well as jewelry and concert tickets, in exchange for the confidential information.

"Over the course of several years, Mr. London secretly fed confidential, insider information to a man he knew would use that information to make trades," U.S. Atty. Andre Birotte Jr. said.

"Behavior like this is an affront to people who follow the law and compromises the public perception in the inherent fairness of the markets by creating an uneven playing field," Birotte said.

London's attorney, Harland Braun, could not be reached for comment.

KPMG resigned as auditor for two of the companies involved, nutritional products maker Herbalife Ltd. in Los Angeles and footwear maker Skechers USA Inc. in Manhattan Beach, after learning of London's misdeeds. Both companies have hired new auditing firms.